e-Invoice Data Exchange: IRBM and Royal Malaysian Customs Department

Malaysia's e-invoicing mandate has been implemented to boost digitization, improve record-keeping, reduce discrepancies, and curb tax evasion. E-invoices will include detailed transactional data, such as seller and buyer information, item descriptions, and tax amounts.

The Inland Revenue Board of Malaysia (IRBM) will share validated e-invoicing data with the Royal Malaysian Customs Department (RMCD). This collaboration aims to enhance tax administration and enforcement across sales, service, and tourism taxes, as well as improve customs duties, import-export control, license management, and the prevention of illegal transactions.

This blog will discuss the e-invoice data exchange between IRBM and RMCD, the functions of RMCD, and its impact.

Lets understand the functions of RMCD first

Royal Malaysian Customs Department (RMCD) Functions

The RMCD serves as the main body for managing Malaysia's customs, trade, and tax regulations, ensuring effective governance and compliance.

Revenue Collection

RMCD is responsible for collecting various forms of national revenue, including import and export duties, excise duties, sales tax, service tax, extraordinary profit levies, vehicle levies, and departure levies. Additionally, it manages non-tax revenue, state revenue/trust money, and tourism taxes.

Trade Facilitation

RMCD facilitates trade by ensuring all imported and exported goods comply with national and international regulations. This includes inspecting and clearing goods at various entry and exit points, such as ports and airports.

Law Enforcement

The department enforces customs, trade, and tax laws by preventing smuggling and other illegal activities through inspections, investigations, and surveillance at borders, ports, and other entry points.

Regulatory Compliance

RMCD ensures compliance with various laws governing customs, taxes, and trade in Malaysia by conducting systematic audits of licensees and importers. It verifies that taxes are properly assessed and collected, investigates cases of non-compliance or fraud, and takes necessary legal actions.

Additional Responsibilities

RMCD also promotes public awareness and integrity through anti-smuggling campaigns and ethical enforcement, manages operational and technical activities, oversees legal matters and corporate planning, and handles human resources and financial management.

Existing Problems with RMCD

Before the introduction of e-invoicing limited access to accurate and complete data led to errors in tax assessments, delayed inspections, and increased administrative burdens. The manual and paper-based processes hindered RMCD’s ability to effectively identify tax evasion, detect fraudulent activities, and ensure compliance with regulations, resulting in a loss of revenue and operational inefficiencies.

Additionally, RMCD struggled with limited visibility into transactions and fragmented communication with other government departments, making it difficult to monitor trade patterns and enforce laws rigorously. The lack of centralized data also restricted strategic planning and decision-making, while the reliance on outdated systems created opportunities for fraud and corruption, further compromising the department’s effectiveness in safeguarding national interests.

Data Collected and Shared By IRBM

The Inland Revenue Board of Malaysia (IRBM) collects various fields of data for e-Invoicing, which includes mandatory and optional information related to both the supplier and buyer. Key data points are categorized into different sections, such as:

1. Parties Involved: Names, Taxpayer Identification Numbers (TIN), registration numbers, and email addresses of both supplier and buyer.
2. Supplier & Buyer Details: Business registration, identification numbers, addresses, contact numbers, SST, and other registration details.
3. Invoice Details: e-invoice type, code/number, date, currency, digital signatures, and billing information.
4. Product/Service Information: Description, unit price, tax type and rate, tax exemptions, discounts, and total amounts.
5. Payment Information: Payment modes, bank account details, payment terms, prepayment data, and bill reference numbers.
6. Annexure for Imports/Exports: Additional data for import/export transactions, including shipping recipient details, customs forms, incoterms, tariff codes, and trade agreement information.

Benefits of Sharing e-invoicing Data with RMCD

The integration of e-invoicing data between the Inland Revenue Board of Malaysia (IRBM) and the Royal Malaysian Customs Department (RMCD) significantly enhances tax administration and customs enforcement. Here’s how this data exchange benefits RMCD’s operations:

Clarifies Tax Liabilities

Validated e-invoices from IRBM provide RMCD with precise details on various duties and taxes, including import and export duties, excise duties, sales tax, service tax, and tourism taxes. This ensures accurate tax assessment and collection, reducing revenue leakage.

Enhances Import/Export Oversight

Detailed information on imports and exports, such as product descriptions, tariff codes, and shipping details, helps RMCD streamline the inspection and clearance process at entry and exit points. This improves the efficiency of goods flow through ports and airports, boosting both local and international trade.

Identifies Discrepancies and Risks

Analysing e-invoice data enables RMCD to detect suspicious patterns and discrepancies that could signal illicit activities. This information aids in targeted investigations and enforcement actions, helping to prevent tax evasion and illegal trade practices.

Ensures Compliance with Licensing Requirements

Systematic data collection allows RMCD to conduct comprehensive audits of licensees and importers, ensuring all tax obligations are met and transactions adhere to legal requirements. This insight helps RMCD monitor compliance with licensing conditions and quickly address any irregularities.

Provides Accurate, Real-Time Data

The e-invoicing system captures all relevant transaction details accurately and in real time. This minimizes errors and discrepancies, enhancing RMCD’s ability to make well-informed decisions and apply effective policies.

Serves as a Strategic Information Hub

Comprehensive e-invoicing data provides RMCD with valuable insights into trade patterns, tax collections, and enforcement needs. This supports strategic decision-making and helps the department develop targeted strategies to tackle emerging challenges and optimize its operations.

Conclusion

Malaysia's e-invoicing mandate and the data exchange between the IRBM and the RMCD represent a major step in enhancing tax administration and customs enforcement. This collaboration provides RMCD with accurate, real-time transaction data, clarifies tax liabilities, streamlines import-export oversight, and improves compliance monitoring. By detecting discrepancies and targeting risks more effectively, RMCD can enhance revenue collection, prevent illegal trade practices, and support Malaysia's economic growth through improved regulatory compliance and trade facilitation.